Market Volatility Continues As Stocks Tumble Again Following Historic Gains Due To Economic Data Concerns

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The stock market plunged again early Thursday, giving back a large chunk of the historic gains made on Wednesday as continued concerns over the stability of the U.S. economy have led to consumer confidence falling to its lowest level in more than three years.

On Wednesday, the Dow Jones enjoyed a 1,000-point surge in one day for the first time in market history. By noon on Thursday, the Dow had lost over 400 points, while the S&P 500 and NASDAQ also saw nearly 2 percent losses in morning trading, continuing a troubling trend of market volatility in recent months, according to Reuters. All three indexes are down over 12 percent in December.

“While retail sales have been very strong, consumer confidence has ticked down here and that could continue unless there is progress made on trade, in the U.S. budget battle and certainly central bank’s policy,” said Bryan Reilly, a managing director of CIBC Private Wealth Management. “It’s been a very difficult environment. The markets haven’t really been trading on fundamentals very much. But with low liquidity and trading models responsible for the majority of trades in recent days, it might not be until the new year till you see greater stability.”

“While yesterday’s price action is definitely a positive sign, it’s still too early to conclude whether the market correction is over or more downside is yet to come,” said Hussein Sayed, market strategist at FXTM. “Such rallies are not uncommon in troubled times, and we have experienced many of them in past bear markets. To call for a bottom, we need at least a couple of days of strength, not just in price, but also in trading volume, breadth of the market, and fundamentally supported environment.”

Amid a partial government shutdown over a disagreement between Congress and the Trump administration regarding a border wall between the U.S. and Mexico, and a budding trade war between the U.S. and China which may involve an executive order banning the use of telecommunications equipment from China’s Huawei Technologies, markets have continued to fluctuate under pressure from concerns over slowing economic growth and rising interest rates.

According to MarketWatch, consumer confidence continues to fall, dropping for the second month in a row to its lowest level since last summer. Those falling confidence levels may be directly tied to the stock market’s decline over the last few months. Additionally, the future expectations index, a measure of what consumers think the economy will look like in six months, dropped over 13 points to its lowest level since October 2016.

“The economy is slowing, but so far it appears orderly,” said Ryan Sweet, director of real-time economics at Moody’s Analytics. “We call for GDP growth to slow in late 2019 and into 2020,… but do not forecast an outright recession.”